Languish.org

Quote401(k) breaches undermining retirement security for millions
By Michael A. Fletcher, Published: January 14 | Updated: Tuesday, January 15, 9:34 AM

A large and growing share of American workers are tapping their retirement savings accounts for non-retirement needs, raising broad questions about the effectiveness of one of the most important savings vehicles for old age.

More than one in four American workers with 401(k) and other retirement savings accounts use them to pay current expenses, new data show. The withdrawals, cash-outs and loans drain nearly a quarter of the $293 billion that workers and employers deposit into the accounts each year, undermining already shaky retirement security for millions of Americans.

With federal policymakers eyeing cuts to Social Security benefits and Medicare to rein in soaring federal deficits, and traditional pensions in a long decline, retirement savings experts say the drain from the accounts has dire implications for future retirees.

"We're going from bad to worse," said Diane Oakley, executive director of the National Institute on Retirement Security. "Already, fewer private-sector workers have access to stable pension plans. And the savings in individual retirement savings accounts like 401(k) plans — which already are severely underfunded — continue to leak out at a high rate."

A report due out this week from the financial advisory firm HelloWallet found that more than one in four workers dip into retirement funds to pay their mortgages, credit card debt or other bills. Those in their 40s have been the most likely culprits — one-third are turning to such accounts for relief.

Fresh data from Vanguard, one of the nation's largest 401(k) managers, show a 12 percent increase in the number of workers who took loans against their retirement accounts or withdrew money outright since 2008.

The most common way Americans tap their retirement funds is through loans, which must be repaid with interest. Those who withdraw money face hefty penalties. In most cases, they not only incur a 10 percent federal tax penalty but also pay income taxes. The costs are financially harmful to families even as ­money-management firms reap massive fees for handling retirement accounts that ultimately are not used for retirement.

In addition, employers often are subsidizing the accounts with matching contributions on the assumption that the money is helping to secure their employees' retirements.

"What you have is 401(k) participants voting with their wallets saying they would much rather use this money for other purposes. I don't think this can be ignored. Employers are dramatically overpaying for retirement, but it is not benefitting the employee," said Matt Fellowes, a former Brookings Institution researcher who is chief executive of Hello­Wallet. "In many cases, the only one benefiting is the vendor."

Since 401(k)s were created by Congress in 1978, concern about the pervasive use of retirement funds for other expenses has grown as other means of retirement security have dwindled.

In 1980, four out of five private-sector workers were covered by traditional pensions that paid them a fixed benefit based on their salary and length of service once they retired. Now, just one in five workers has a pension, leaving 401(k)s and similar retirement savings accounts as the primary vehicles for retirees to supplement their Social Security benefits.

"Encouraging or enabling people to spend down retirement money in anything other than the most severe circumstances is a terrible mistake," said David C. John, a senior fellow at the Heritage Foundation who studies retirement policy.

But millions of Americans, caught between flat wages and high expenses for everything from sending children to college to making home repairs, feel as though they have little choice. The withdrawals have grown substantially in the wake of the financial crisis.

In 2010, 28 percent of participants reported having an outstanding loan against their retirement accounts, an all-time high, according to a survey of 110 large employers by Aon Hewitt, a human resources consultancy. And nearly 7 percent of employees took hardship withdrawals that year — roughly a 40 percent increase since the recession, while 42 percent of workers cashed out their plans rather than rolling them over when they changed jobs.

Charlotte Knox, 62, has worked as a housekeeper at Baltimore's Hyatt Regency hotel since 1984. She earns $13 an hour, is struggling to recover from a hip replacement and is planning to retire next month. But partly because of past withdrawals, her 401(k) balance is only $60,000, which is all she has to supplement her Social Security.

"I don't have any money," she said. "I'm just taking it a day at a time. That's all I can do."

Overall, about a third of American households participate in 401(k)-type accounts, which hold a combined $3.5 trillion in assets. But a large portion of that money does not make it to retirement. A recent study by Boston College's Center for Retirement Research found that the typical household approaching retirement age has an average of $120,000 in retirement savings, enough for roughly a $7,000-a-year annuity.

"401(k)s are not being used for retirement by a large and growing share of workers because they are misaligned with the very basic financial problems most workers face and must address," said Fellowes of HelloWallet, which provides benefits advice to companies.

Federal policymakers and employer retirement managers have focused little on the threat to retirement security posed by premature withdrawals from savings plans and instead have worked to devise ways to get workers to put more money into the accounts at an earlier age.

In 2006, employers were given broader latitude to enroll employees in 401(k)-type plans unless workers asked not to participate. Just this year, the annual limit for 401(k)-type contributions increased from $17,000 to $17,500 for workers under age 50 and from $22,500 to $23,000 for those who are older. Meanwhile, the Saver's Tax Credit provides up to $1,000 to help low-income workers build retirement savings.

Many employers have embraced 401(k) and other defined-contribution accounts as a way of helping workers save for retirement while relieving themselves of the financial risks that come with managing a traditional pension plan. In theory, 401(k) accounts are better suited to an economy in which workers are changing jobs more frequently than ever because the accounts can be rolled over from previous employers.

But their success depends on workers consistently contributing to them and allowing the money to stay in place throughout their careers, allowing their investment returns to compound. Many workers — particularly some earning higher salaries — do just that. But many others, who have precious little savings elsewhere, tap their retirement money as a sort of "rainy day" fund, eroding its power for the future.

Generally, workers are allowed to tap their retirement accounts for loans up to $50,000, or half their account's value, whichever is smaller. They also can "cash out" the money when they change jobs or they can take "hardship" withdrawals, which often go to pay for housing, overdue bills or educational expenses. The cash-outs and hardship withdrawals subject account holders to taxes on the money they put into the accounts, any investment gains, and if they are under 591 / 2 years old, a 10 percent tax penalty.

Experts warn that when workers draw on their retirement accounts to pay current bills, they put themselves at greater risk of descending into poverty upon retirement, which would leave them dependent on government programs such as subsidized housing or food stamps. Nearly 6 million senior citizens were living in or near poverty in 2010, according to a Senate committee, a number expected to increase sharply over the coming decade after a long period of decline.

HelloWallet's report found that lower-income people, who are the most frequent users of payday loans, pawnshops and other high-cost credit outlets, were found to be those most likely to cash out their retirement plans when they changed jobs.

Using data from the Federal Reserve's Survey of Consumer Finances and the Survey of Income and Program Participation, conducted by the Census Bureau, the report said 30 percent of households earning less than $50,000 a year had cashed out a retirement plan for non-retirement purposes. Only 12 percent of households earning between $100,000 and $150,000 a year and 8 percent of those earning more than $150,000 a year have cashed out a retirement account, the report said.

The widespread breaching of retirement accounts has led some advocates to conclude that policy­makers and employers should expand their vision when thinking about their workers' retirement needs.

Fellowes said workers would be better served by establishing emergency savings accounts that steered clear of the potential tax penalties, investment fees, and other risks and costs associated with having money in retirement accounts. Only after establishing an emergency savings fund, he said, should workers plow their money into retirement savings.

"The investment advice out there needs to recognize that a large share of participants is not going to use the money for retirement, so they should not be exposed to risky investments," Fellowes said. "There is no investment adviser in the country who would put workers in the stock market if they were told the money being invested was for short-term needs."

Had temptations in the past but never did it.

I have a pension which I cannot raid.  WHERE IS MY FREEDOM?!

There's like 4k in them, so no.

Just check, I have 7k.

Government has been making noise about "updating" my defined-benefit pension plan. :ultra:

My dad's currently living in my pension.

Quote from: Brazen on January 16, 2013, 11:44:11 AM
My dad's currently living in my pension.

Let's hope he doesn't spend your pension on a nursing home.

My pension is as untouchable as Elliot Ness.

Quote from: Gups on January 16, 2013, 11:50:45 AM

Quote from: Brazen on January 16, 2013, 11:44:11 AM
My dad's currently living in my pension.

Let's hope he doesn't spend your pension on a nursing home.

My pension is as untouchable as Elliot Ness.

Or do what a friend of mine's dad did in his 80s - take up with a 22 year old Burmese woman. Caused a bit of a stir when he brought her to my friend's wedding.  :lol:

I'm not touching my retirement savings.

Quote from: Barrister on January 16, 2013, 11:37:32 AM
Government has been making noise about "updating" my defined-benefit pension plan. :ultra:

Harper would never do such a thing.

Quote from: Jacob on January 16, 2013, 11:58:17 AM

Quote from: Barrister on January 16, 2013, 11:37:32 AM
Government has been making noise about "updating" my defined-benefit pension plan. :ultra:

Harper would never do such a thing.

But I work for Redford, not Harper. :(

And actually it looks like the screw job is continuing apace.

My pension plan sent out a mailing right before Christmas (I wonder why they chose then) describing they were concerned about the pension plan's "sustainability".  They outlined four possible options for the future, all of which sucked:

-reduce your pension to 30% of your final salary
-maintain your pension at 50-60% (can't remember), but not indexed
-switch to defined contribution plan
-a "we won't promise you anything, we'll just pay you what we can" monstrosity

The notice said they wanted feedback, but only gave an email address.  They said they'd conduct "focus groups" but nobody apparently has been invited to those.  They refused to meet with our association (we're not unionized) saying it "would not be beneficial" because it's too early in the process.

Whatever - I know this game.  Government strings something along saying it is "gathering information", that there are no firm proposals, nothing to discuss.  Then there is some tipping point when it immediately becomes finalized and then "too late to discuss options".

They're doing this because we're classified as management, and managers are an overall small part of the public service.   But it's just because Redford sold her soul to the Teachers Union that she isn't going after the elephant in the room of unionized public service pensions.

Yeah, that does sound like the screw job is coming :(

Speaking of changing financial situations, here's a WSJ illustration of the impact of the changes in US taxes:

(https://a248.e.akamai.net/f/1731/67675/12h/si.wsj.net/public/resources/images/BF-AE118B_05WIc_G_20130104192101.jpg)

Look how depressed everybody looks about their taxes, even the baby.

Quote from: Jacob on January 16, 2013, 02:16:04 PM
Speaking of changing financial situations, here's a WSJ illustration of the impact of the changes in US taxes:

(https://a248.e.akamai.net/f/1731/67675/12h/si.wsj.net/public/resources/images/BF-AE118B_05WIc_G_20130104192101.jpg)

Is this a representative sample?  :hmm:

Tax increases wouldn't be as much of a problem if employers didn't possess such a unabashed love affair with stagnating and suppressing wages in order to increase shareholder value.


I'd do the halfbreed Asian single chick with the $230,000 salary, though.

Great, a Murdoch rag. :rolleyes:

Quote from: Jacob on January 16, 2013, 02:16:04 PM
Speaking of changing financial situations, here's a WSJ illustration of the impact of the changes in US taxes:

All those people are still taking home $150 grand after taxes, which is pretty comfortable.  "OMG!  20k more in taxes!" sounds bad, but then they undermine their scare tactics by pointing out that Married Couple still clears almost half a millions dollars a year.

Quote from: Neil on January 16, 2013, 02:55:52 PM

Quote from: Jacob on January 16, 2013, 02:16:04 PM
Speaking of changing financial situations, here's a WSJ illustration of the impact of the changes in US taxes:

All those people are still taking home $150 grand after taxes, which is pretty comfortable.  "OMG!  20k more in taxes!" sounds bad, but then they undermine their scare tactics by pointing out that Married Couple still clears almost half a millions dollars a year.

Not only that, but why didn't they show the couple as only bringing in $180,000 - $250,000 like the other situations? I mean, Anyone making over $650,000 is going to pay a higher tax regardless of their marital/familial status. It's ridiculous.

Quote from: merithyn on January 16, 2013, 03:12:38 PM

Quote from: Neil on January 16, 2013, 02:55:52 PM

Quote from: Jacob on January 16, 2013, 02:16:04 PM
Speaking of changing financial situations, here's a WSJ illustration of the impact of the changes in US taxes:

All those people are still taking home $150 grand after taxes, which is pretty comfortable.  "OMG!  20k more in taxes!" sounds bad, but then they undermine their scare tactics by pointing out that Married Couple still clears almost half a millions dollars a year.

Not only that, but why didn't they show the couple as only bringing in $180,000 - $250,000 like the other situations? I mean, Anyone making over $650,000 is going to pay a higher tax regardless of their marital/familial status. It's ridiculous.

Maybe they used the examples their readers could identify with.

Quote from: DGuller on January 16, 2013, 02:18:59 PM
Is this a representative sample?  :hmm:

You mean the average American adult doesn't have an investment income of $49,000 per annum.   :hmm:

Quote from: DGuller on January 16, 2013, 03:18:33 PM

Quote from: merithyn on January 16, 2013, 03:12:38 PM

Quote from: Neil on January 16, 2013, 02:55:52 PM

Quote from: Jacob on January 16, 2013, 02:16:04 PM
Speaking of changing financial situations, here's a WSJ illustration of the impact of the changes in US taxes:

All those people are still taking home $150 grand after taxes, which is pretty comfortable.  "OMG!  20k more in taxes!" sounds bad, but then they undermine their scare tactics by pointing out that Married Couple still clears almost half a millions dollars a year.

Not only that, but why didn't they show the couple as only bringing in $180,000 - $250,000 like the other situations? I mean, Anyone making over $650,000 is going to pay a higher tax regardless of their marital/familial status. It's ridiculous.

Maybe they used the examples their readers could identify with.

Heh. Well, I'm certainly not their targeted audience, or they'd all be making less than $50k.  :ph34r:

Quote from: DGuller on January 16, 2013, 02:18:59 PM
Is this a representative sample?  :hmm:

It's representative of the class of people most likely to be affected by the change in the top marginal rate and the changes in treatment of investment income.
(and of the WSJ's target demographics . . . )

I'm now spending a lot of my savings on the interior of my new flat.

Foot?

I don't think I can access those money before the age of 68, or 70 or whatever they raise the pension age to when I get around to being old.

Quote from: Liep on January 16, 2013, 04:02:55 PM
I don't think I can access those money before the age of 68, or 70 or whatever they raise the pension age to when I get around to being old.

Maybe you can't, but they sure can...

(https://a248.e.akamai.net/f/1731/67675/12h/si.wsj.net/public/resources/images/BF-AE118B_05WIc_G_20130104192101.jpg)


HOW IN THE FUCK DID THEY FIND MY FAMILY PORTRAIT?

I have to say if I was making $35,000 in investment income every year I would be pretty jolly.

Those guys look pretty sad for the cash they are bring in.

Quote from: Valmy on January 16, 2013, 05:00:58 PM
I have to say if I was making $35,000 in investment income every year I would be pretty jolly.

Maybe not if you were a day-trader :D

When I leave Japan I have the option of either transferring my pension payments to the UK or claiming them back.
Of course I'm going to take the money. What are the odds of me living long enough to claim a pension? What are the odds of it still being in any way relevant 40 years down the line anyway?

That's the ticket. Andy Capp needs booze money.

No, I don't have the option to raid my pension plan.  Which looks pretty solid as the HK government runs gigantic surpluses year after year. 

I've been living below my means forever, so that means I am putting money into my own retirement nest egg every month. 

Since I really don't have any retirement options to speak of, I've decided to blow my brains out promptly at 67 years of age (that'll be in 2037), or whenever I become too infirm to work for a living, whichever comes first.

And no, assholes, unemployed =/ too infirm to work.  So solly. :P

Quote from: Ed Anger on January 17, 2013, 08:37:51 AM
That's the ticket. Andy Capp needs booze money.

:lol:

Just received the following email:

QuoteI want you to be among the first to hear about the Premier's Televised Address. It is scheduled for broadcast on CTV across the province tomorrow (Thursday) night at 6:52 p.m. It will be re-broadcast on CTV2 at 7:52pm, 11:52pm and on January 25 at 11:52 am.

I know there's been a lot of discussion lately, among the Alberta Public Service and across the province, about the current fiscal state of the province and what that might mean to both the revenue and expenditure sides of the equation. Premier Redford will speak to Albertans about her vision for our province, the priorities of this government, the opportunities to meet the growth that we continue to experience as well as the fiscal challenges that we currently face. I encourage you to watch the Address, which will be immediately followed tomorrow night with a special edition of the Connector delivered to your inbox that will feature highlights from the address, along with messages from the Premier and me to all members of the APS.

I'm confident that through an informed, committed, inspired and engaged Alberta Public Service, we will rise to any challenge put before us. With your support, we'll continue to deliver the core programs and services important to Albertans.

There will be blood.   :ph34r:


For those of you not following the state of Alberta's economy, the recent declines in the price of oil (which are magnified here due to limited shipping / refining capacity) is doing a number on the province's bottom line.

But, Barrister, you're so lucky to have a government pension! Lucky lucky lucky!  :P

Quote from: CountDeMoney on January 17, 2013, 12:51:09 PM
Since I really don't have any retirement options to speak of, I've decided to blow my brains out promptly at 67 years of age (that'll be in 2037), or whenever I become too infirm to work for a living, whichever comes first.

And no, assholes, unemployed =/ too infirm to work.  So solly. :P

My plan is more along the lines of choosing a favorite National Park, and disappearing into the backcountry wilderness (without having applied for a necessary permit).

Kinda like the whole ice floe thing.

Quote from: Ed Anger on January 17, 2013, 08:37:51 AM
That's the ticket. Andy Capp needs booze money.

Tyr is so full of good decisions, it's a bit surprising that he isn't showered with success more often.

As of tomorrow, I'll actually start paying into mine now. :)

Quote from: Barrister on January 23, 2013, 05:44:52 PM
Just received the following email:

QuoteI want you to be among the first to hear about the Premier's Televised Address. It is scheduled for broadcast on CTV across the province tomorrow (Thursday) night at 6:52 p.m. It will be re-broadcast on CTV2 at 7:52pm, 11:52pm and on January 25 at 11:52 am.

I know there's been a lot of discussion lately, among the Alberta Public Service and across the province, about the current fiscal state of the province and what that might mean to both the revenue and expenditure sides of the equation. Premier Redford will speak to Albertans about her vision for our province, the priorities of this government, the opportunities to meet the growth that we continue to experience as well as the fiscal challenges that we currently face. I encourage you to watch the Address, which will be immediately followed tomorrow night with a special edition of the Connector delivered to your inbox that will feature highlights from the address, along with messages from the Premier and me to all members of the APS.

I'm confident that through an informed, committed, inspired and engaged Alberta Public Service, we will rise to any challenge put before us. With your support, we'll continue to deliver the core programs and services important to Albertans.

There will be blood.   :ph34r:


For those of you not following the state of Alberta's economy, the recent declines in the price of oil (which are magnified here due to limited shipping / refining capacity) is doing a number on the province's bottom line.

What a stupid announcement.

'Despite record-setting deficits, we are committed that we will not raise taxes, nor will we cut social services'.

Instead they are going to "review spending", as if we haven't heard that before. :rolleyes:

Defined contribution man, it's the way to go.  Once it's paid out, they can't take it back.

Quote from: Admiral Yi on January 25, 2013, 10:24:36 AM
Defined contribution man, it's the way to go.  Once it's paid out, they can't take it back.

But the problem is I have no idea if I'm going to keel over at age 65, or hang on until I'm 95.  Since I don't want to run out of money, I have to assume 95.  But odds are I'll die at some point before then.

Defined benefit plans are inefficient.  I like the pooled risk.

Then plop all your money into an annuity when you hit 65.  You don't need Big Brother holding your hand.

Quote from: Admiral Yi on January 25, 2013, 10:35:30 AM
Then plop all your money into an annuity when you hit 65.  You don't need Big Brother holding your hand.

Then you're putting all your eggs in one basket.  If the company you purchase your annuity from goes under, you're out of luck.

Besides, who doesn't like holding hands? :)

You for one.  :P

What are you bitching about now, if not the fickle nature of Big Brother's affections?

Quote from: Admiral Yi on January 25, 2013, 11:03:01 AM
You for one.  :P

What are you bitching about now, if not the fickle nature of Big Brother's affections?

People saving for retirement are screwed seemingly no matter what (we) do.

Rely on government? Why, they will just raid the pensions kitty when they run out of cash - which is always. By the time you come to retire, there won't be enough left to feed your cat, let alone you. Even if you choose to eat cat food.

Put money in a savings account? Well, with rates as they are, might as well put cash under your matress.

Rely on investing in equities? Stock market crashes and takes all your money with it.

Rely on professional investment advisors? They will rob you blind with fees, *then* the stock market will crash and take all your money with it.  :lol:

Quote from: Malthus on January 25, 2013, 11:12:20 AM

Quote from: Admiral Yi on January 25, 2013, 11:03:01 AM
You for one.  :P

What are you bitching about now, if not the fickle nature of Big Brother's affections?

People saving for retirement are screwed seemingly no matter what (we) do.

Rely on government? Why, they will just raid the pensions kitty when they run out of cash - which is always. By the time you come to retire, there won't be enough left to feed your cat, let alone you. Even if you choose to eat cat food.

Put money in a savings account? Well, with rates as they are, might as well put cash under your matress.

Rely on investing in equities? Stock market crashes and takes all your money with it.

Rely on professional investment advisors? They will rob you blind with fees, *then* the stock market will crash and take all your money with it.  :lol:

Become a politician or high-level government bureaucrat. Security achieved.

The old people around here are having to invest in rental properties and start small businesses to fund their retirement.  The low interest rates are killing them and basically blew up their retirement plans.

Quote from: Valmy on January 25, 2013, 11:18:51 AM
The old people around here are having to invest in rental properties and start small businesses to fund their retirement.  The low interest rates are killing them and basically blew up their retirement plans.

I'm planning to do the rental properties thing, myself. Meri the Slum Lady has a nice ring to it, doesn't it? :D

Quote from: merithyn on January 25, 2013, 11:22:13 AM

Quote from: Valmy on January 25, 2013, 11:18:51 AM
The old people around here are having to invest in rental properties and start small businesses to fund their retirement.  The low interest rates are killing them and basically blew up their retirement plans.

I'm planning to do the rental properties thing, myself. Meri the Slum Lady has a nice ring to it, doesn't it? :D

I've heard of tons of people saying they want to own rental properties.  It's the financial trend du jour.

Which makes me think it's now a bad idea, in particular in Canada where we have declining real estate prices.

Quote from: Malthus on January 25, 2013, 11:12:20 AM
Rely on investing in equities? Stock market crashes and takes all your money with it.

Then you wait a year and all your money comes back.

Quote from: Admiral Yi on January 25, 2013, 11:27:15 AM

Quote from: Malthus on January 25, 2013, 11:12:20 AM
Rely on investing in equities? Stock market crashes and takes all your money with it.

Then you wait a year and all your money comes back.

Only if there is a Bernanke II.

Quote from: Barrister on January 25, 2013, 11:24:19 AM
I've heard of tons of people saying they want to own rental properties.  It's the financial trend du jour.

Which makes me think it's now a bad idea, in particular in Canada where we have declining real estate prices.

That's actually what makes buying and renting properties smart now. Buy the houses while they're cheap, rent them out, and keep the house for 15-20 years. The real estate prices are going to bounce back from where they are now. Will they go as high as they were before? Oh, I hope not. However, if you're smart about how you set your rents and take care of your properties, the houses will appreciate and you'll get a monthly income. It's not free money - there's work involved - but it's a smart way to earn extra money.

Quote from: Barrister on January 25, 2013, 11:24:19 AM

Quote from: merithyn on January 25, 2013, 11:22:13 AM

Quote from: Valmy on January 25, 2013, 11:18:51 AM
The old people around here are having to invest in rental properties and start small businesses to fund their retirement.  The low interest rates are killing them and basically blew up their retirement plans.

I'm planning to do the rental properties thing, myself. Meri the Slum Lady has a nice ring to it, doesn't it? :D

I've heard of tons of people saying they want to own rental properties.  It's the financial trend du jour.

Which makes me think it's now a bad idea, in particular in Canada where we have declining real estate prices.

From what I've seen, renting properties is a risky way for the average person to make money. You are at the mercy of your tenants, and should they choose to wreck your place and/or not pay rent, they can very effectively get away with it for a long time and cost you much money to get rid of them. There is a reason slum lords have goons as enforcers.  :lol:

That's true no matter what real-estate prices do.

You can get round this by requiring decent size deposits and (possibly) guarantors.

Renting property in London has been very popular for many years now and still produces very good yields as well as capital growth. It's getting the finance that is the hard bit.

Retirement saving is pointless anyways.  If you're involved in the stock market, your money will be stolen from you, as that's the whole point of the stock market.

My plan is to suffer a massive stroke no later than my mid-50s and die.

Quote from: Gups on January 25, 2013, 11:48:07 AM
You can get round this by requiring decent size deposits and (possibly) guarantors.

Renting property in London has been very popular for many years now and still produces very good yields as well as capital growth. It's getting the finance that is the hard bit.

Depends on the market. If there is a shortage of rental units available, it is a lot easier to demand sizable conditions like big deposits and guarantors. If many retirees are getting in the business, one's bargaining power to require such demands as conditions is perforce more limited.

I'm just going by the horror stories I've heard from people trying out this method of making money here in Canada.

Quote from: Malthus on January 25, 2013, 11:52:40 AM

Depends on the market. If there is a shortage of rental units available, it is a lot easier to demand sizable conditions like big deposits and guarantors. If many retirees are getting in the business, one's bargaining power to require such demands as conditions is perforce more limited.

I'm just going by the horror stories I've heard from people trying out this method of making money here in Canada.

That's why where you own the property is as important as what property you own. It's a business, and as such has risks. There are ways to minimize the risks - and Gups has given some - and ways to improve the situation based on how you handle the initial outlay of cash.

Quote from: Malthus on January 25, 2013, 11:52:40 AM
I'm just going by the horror stories I've heard from people trying out this method of making money here in Canada.

Yeah, a guy I used to work with had rental properties.  He always had to take days off to go to court to get people evicted, and it was a long, painful process.

Quote from: merithyn on January 25, 2013, 11:37:49 AM

Quote from: Barrister on January 25, 2013, 11:24:19 AM
I've heard of tons of people saying they want to own rental properties.  It's the financial trend du jour.

Which makes me think it's now a bad idea, in particular in Canada where we have declining real estate prices.

That's actually what makes buying and renting properties smart now. Buy the houses while they're cheap, rent them out, and keep the house for 15-20 years. The real estate prices are going to bounce back from where they are now. Will they go as high as they were before? Oh, I hope not. However, if you're smart about how you set your rents and take care of your properties, the houses will appreciate and you'll get a monthly income. It's not free money - there's work involved - but it's a smart way to earn extra money.

But you're betting on the fact that house prices have bottomed out, and will increase.

The housing boom of the last 20 years was historically unusual.  There's no guarantee that housing prices will increase over the next 15-20 years.  Some suggest that the demographic shift of all the boomers retiring (and selling their homes to downsize) is going to put downward pressure on house values for years to come.

If the price go down too much the boomers won't sell.

Quote from: Grey Fox on January 25, 2013, 12:06:36 PM
If the price go down too much the boomers won't sell.

They'll have no choice.  Many do not have enough saved for retirement, and have little of value besides their home.

Quote from: merithyn on January 25, 2013, 12:01:07 PM

Quote from: Malthus on January 25, 2013, 11:52:40 AM

Depends on the market. If there is a shortage of rental units available, it is a lot easier to demand sizable conditions like big deposits and guarantors. If many retirees are getting in the business, one's bargaining power to require such demands as conditions is perforce more limited.

I'm just going by the horror stories I've heard from people trying out this method of making money here in Canada.

That's why where you own the property is as important as what property you own. It's a business, and as such has risks. There are ways to minimize the risks - and Gups has given some - and ways to improve the situation based on how you handle the initial outlay of cash.

Sure. I'm just pointing out that it's a reasonably risky business. Many who go into it are not prepared for those risks, and when it becomes known as the can't-fail business du jour for the average investor with absolutely no experience in rental property management, you can bet that many are going to get badly burned - quite aside from the potential problems of oversupply on the rental market, fluctuations in real-estate prices, etc.

Quote from: Neil on January 25, 2013, 12:05:26 PM

Quote from: Malthus on January 25, 2013, 11:52:40 AM
I'm just going by the horror stories I've heard from people trying out this method of making money here in Canada.

Yeah, a guy I used to work with had rental properties.  He always had to take days off to go to court to get people evicted, and it was a long, painful process.

Yup. Depending on jurisdiction, tenants can be awfully difficult to get rid of, with many legal avenues to delay the slinging-stuff-into-the-street procedure.

This is all your fault, Malthus.  The law ruins everything.

Quote from: Malthus on January 25, 2013, 12:11:59 PM

Quote from: merithyn on January 25, 2013, 12:01:07 PM

Quote from: Malthus on January 25, 2013, 11:52:40 AM

Depends on the market. If there is a shortage of rental units available, it is a lot easier to demand sizable conditions like big deposits and guarantors. If many retirees are getting in the business, one's bargaining power to require such demands as conditions is perforce more limited.

I'm just going by the horror stories I've heard from people trying out this method of making money here in Canada.

That's why where you own the property is as important as what property you own. It's a business, and as such has risks. There are ways to minimize the risks - and Gups has given some - and ways to improve the situation based on how you handle the initial outlay of cash.

Sure. I'm just pointing out that it's a reasonably risky business. Many who go into it are not prepared for those risks, and when it becomes known as the can't-fail business du jour for the average investor with absolutely no experience in rental property management, you can bet that many are going to get badly burned - quite aside from the potential problems of oversupply on the rental market, fluctuations in real-estate prices, etc.

I think Meri has it right when she says rental properties are a business, but I'm not sure if she realizes the implications of that.

Many of the people who I hear talk about wanting to own rental properties seem to view it as an investment - that they can buy the property and it will automatically spit out revenue.  It won't.  It will take a fair bit of work.

Oh, and here's a fun article I found on The Atlantic for my fellow canucks:

http://www.theatlantic.com/business/archive/2013/01/the-biggest-housing-bubble-in-the-world-is-in-canada/272499/

Quote from: Barrister on January 25, 2013, 12:18:40 PM
Oh, and here's a fun article I found on The Atlantic for my fellow canucks:

http://www.theatlantic.com/business/archive/2013/01/the-biggest-housing-bubble-in-the-world-is-in-canada/272499/

Ottawa has been a-tinkering. We'll see if they manage to pull off a soft landing.

However, I will point out that warning about an overinflated housing market in Canada has been going on for at least as long as I've cared about the issue - say, a decade or so. When I was buying a house (more than seven years ago) I was widely warned not to, because I ought to wait for the bubble to burst and pick one up cheap. I'd still be waiting.

Quote from: Barrister on January 25, 2013, 12:18:40 PM

I think Meri has it right when she says rental properties are a business, but I'm not sure if she realizes the implications of that.

Many of the people who I hear talk about wanting to own rental properties seem to view it as an investment - that they can buy the property and it will automatically spit out revenue.  It won't.  It will take a fair bit of work.

Oh, and here's a fun article I found on The Atlantic for my fellow canucks:

http://www.theatlantic.com/business/archive/2013/01/the-biggest-housing-bubble-in-the-world-is-in-canada/272499/

WTF? :huh:

Where in this thread have I seemed as if I don't know what the fuck I'm talking about? Was it the part where I said that it's a business, that it has risks, that it's takes hard work, or that you have to do your due diligence before you buy and/or rent?

Quote from: Malthus on January 25, 2013, 12:24:41 PM

Quote from: Barrister on January 25, 2013, 12:18:40 PM
Oh, and here's a fun article I found on The Atlantic for my fellow canucks:

http://www.theatlantic.com/business/archive/2013/01/the-biggest-housing-bubble-in-the-world-is-in-canada/272499/

Ottawa has been a-tinkering. We'll see if they manage to pull off a soft landing.

However, I will point out that warning about an overinflated housing market in Canada has been going on for at least as long as I've cared about the issue - say, a decade or so. When I was buying a house (more than seven years ago) I was widely warned not to, because I ought to wait for the bubble to burst and pick one up cheap. I'd still be waiting.

I agree in that it's almost impossible to time the market.  If you need to own a home, then go buy a home and don't worry about it.

But if you're looking to make an investment, all signs point to Canadian real estate being a really bad investment right now.

Quote from: Malthus on January 25, 2013, 11:39:56 AM
From what I've seen, renting properties is a risky way for the average person to make money.

Yeah well until we find that non-risky way we are stuck with it.

Quote from: merithyn on January 25, 2013, 12:01:07 PM

Quote from: Malthus on January 25, 2013, 11:52:40 AM

Depends on the market. If there is a shortage of rental units available, it is a lot easier to demand sizable conditions like big deposits and guarantors. If many retirees are getting in the business, one's bargaining power to require such demands as conditions is perforce more limited.

I'm just going by the horror stories I've heard from people trying out this method of making money here in Canada.

That's why where you own the property is as important as what property you own. It's a business, and as such has risks. There are ways to minimize the risks - and Gups has given some - and ways to improve the situation based on how you handle the initial outlay of cash.

I am not sure how one protects themselves against the overly generous provisions of residential tenancy legislation which prevents effective monitoring of the property to ensure it is treated properly or evicting non payers in a timely efficient way.

An alternative we have been looking at for when the boys move out is offering our basement suite for short stay vacationers.   But then again simply downsizing still probably makes more sense given the damned property taxes on the place.

Quote from: Valmy on January 25, 2013, 12:33:30 PM

Quote from: Malthus on January 25, 2013, 11:39:56 AM
From what I've seen, renting properties is a risky way for the average person to make money.

Yeah well until we find that non-risky way we are stuck with it.

Well of course over the long-term the stock market has proven to be a consistent winner.

Quote from: Malthus on January 25, 2013, 12:14:26 PM

Quote from: Neil on January 25, 2013, 12:05:26 PM

Yup. Depending on jurisdiction, tenants can be awfully difficult to get rid of, with many legal avenues to delay the slinging-stuff-into-the-street procedure.

Most property in the UK is rented on a shordhold tenancy. It's really pretty easy to get rid of a tenant that doesn't pay rent. So obviously very jurisdiction dependent.

Quote from: Barrister on January 25, 2013, 12:35:14 PM

Quote from: Valmy on January 25, 2013, 12:33:30 PM

Quote from: Malthus on January 25, 2013, 11:39:56 AM
From what I've seen, renting properties is a risky way for the average person to make money.

Yeah well until we find that non-risky way we are stuck with it.

Well of course over the long-term the stock market has proven to be a consistent winner.

And only requires the click of a mouse. :)

Quote from: Barrister on January 25, 2013, 12:35:14 PM
Well of course over the long-term the stock market has proven to be a consistent winner.

Well yeah if you are saving for retirement a diverse portfolio of mutual funds is a great idea, and everybody should do that if they can.  But not so much if you ARE retired and need a steady source of income.

Quote from: Valmy on January 25, 2013, 12:41:11 PM
Well yeah if you are saving for retirement a diverse portfolio of mutual funds is a great idea, and everybody should do that if they can.

The only reason to put your money in mutual funds is because your 401k gives you no other choice.

Much better to buy stocks or ETFs directly and save yourself the management fee.

Quote from: Admiral Yi on January 25, 2013, 12:43:58 PM

Quote from: Valmy on January 25, 2013, 12:41:11 PM
Well yeah if you are saving for retirement a diverse portfolio of mutual funds is a great idea, and everybody should do that if they can.

The only reason to put your money in mutual funds is because your 401k gives you no other choice.

Much better to buy stocks or ETFs directly and save yourself the management fee.

You dont have the option to create your own self directed fund within a 401k plan?

Quote from: crazy canuck on January 25, 2013, 12:45:13 PM
You dont have the option to create your own self directed fund within a 401k plan?

I'm given a list of about 7 managed funds to choose from.

Quote from: Admiral Yi on January 25, 2013, 12:43:58 PM
Much better to buy stocks or ETFs directly and save yourself the management fee.

Buying individual stocks is a little different than 'investing in the stockmarket' in general and relying on its track record of longterm growth though isn't it?

Quote from: Valmy on January 25, 2013, 12:33:30 PM

Quote from: Malthus on January 25, 2013, 11:39:56 AM
From what I've seen, renting properties is a risky way for the average person to make money.

Yeah well until we find that non-risky way we are stuck with it.

There is a whole spectrum of ways to invest one's money, or to start a business. All involve some level of risk, but not all have the same level.

My concern is this: retirees really ought, in a perfect world, to be investing their money in reasonably low-risk investments. This is a reasonably high-risk business (again depending on jurisdiction), but many don't seem to know that. Moreover, the risks are not merely financial - you are dealing with tenants and, if they are unreasonable, you will end up in litigation or worse. Retirees may not be the best persons to deal with the downside risk - which at worst is abusive and possibly insane tenants who wreck their property and/or refuse to pay rent, blame the evil landlord for all their troubles, have multiple (possibly true) sob stories about why they can't pay this month and why oh why can't you just give them a break? Etc.

All people see is that it is a business they can readily get into. My concern is that many do not know what they are getting themselves in for. 

Quote from: Valmy on January 25, 2013, 12:46:27 PM
Buying individual stocks is a little different than 'investing in the stockmarket' in general and relying on its track record of longterm growth though isn't it?

You can diversify (which I think is what you're getting at) by buying a variety of individual stocks.  Or you can do it much easier by buying broad index funds.

Quote from: Admiral Yi on January 25, 2013, 12:46:26 PM

Quote from: crazy canuck on January 25, 2013, 12:45:13 PM
You dont have the option to create your own self directed fund within a 401k plan?

I'm given a list of about 7 managed funds to choose from.

Wow, that sucks.  What is the justification for it being so restrictive?

Quote from: Malthus on January 25, 2013, 12:47:51 PM
All people see is that it is a business they can readily get into. My concern is that many do not know what they are getting themselves in for. 

Well the retired people I see doing it have been landlords before and know what they are doing.  They now have the time to focus on it and it is what they know.

But doing this was not their first choice, they are doing it because of the low interest rates which ruined their plans at least in the short term.  I was just using that as an example not general advice for everybody.

Quote from: Valmy on January 25, 2013, 12:46:27 PM
Buying individual stocks is a little different than 'investing in the stockmarket' in general and relying on its track record of longterm growth though isn't it?

You can buy ETFs that track passive indices; in fact, those are may of the most popular ETFs.
There is a small fee advantage for ETFs although for the better passive MFs like Vanguard it is a pretty small difference.

Quote from: crazy canuck on January 25, 2013, 12:49:09 PM
Wow, that sucks.  What is the justification for it being so restrictive?

You mean in terms of the small number of funds, or in terms of being limited to actively managed funds?

My understanding is that one reason (the only reason?) 401ks are limited to managed funds is because they are the only instruments set up to handle little dribs and drabs of money every pay period.  Clearly you can't walk into an exchange and say "I'd like to buy $50 worth of stock every two weeks."  Or you could, but you would get wiped out by brokerage fees.

Quote from: Admiral Yi on January 25, 2013, 12:53:35 PM

Quote from: crazy canuck on January 25, 2013, 12:49:09 PM
Wow, that sucks.  What is the justification for it being so restrictive?

You mean in terms of the small number of funds, or in terms of being limited to actively managed funds?

My understanding is that one reason (the only reason?) 401ks are limited to managed funds is because they are the only instruments set up to handle little dribs and drabs of money every pay period.  Clearly you can't walk into an exchange and say "I'd like to buy $50 worth of stock every two weeks."  Or you could, but you would get wiped out by brokerage fees.

But what you could do is take your 401k contributions in cash and then invest the said cash in the time and place that best suites you.  That is generally how our equivalent works.

Quote from: Valmy on January 25, 2013, 12:50:27 PM

Well the retired people I see doing it have been landlords before and know what they are doing.  They now have the time to focus on it and it is what they know.

But doing this was not their first choice, they are doing it because of the low interest rates which ruined their plans at least in the short term.  I was just using that as an example not general advice for everybody.

Don't confuse the lawyers with the idea that "regular people" actually know how to run a business, Valmy.

Quote from: crazy canuck on January 25, 2013, 12:56:14 PM

But what you could do is take your 401k contributions in cash and then invest the said cash in the time and place that best suites you.  That is generally how our equivalent works.

My 401Ks are contributed to by the company, but only if I contribute to them, too. If I pull money from the 401K prematurely, there's a massive fee.

It doesn't seem possible to do what you're suggesting and still get the full amount, ie from the employer.

Quote from: merithyn on January 25, 2013, 12:57:26 PM

Quote from: Valmy on January 25, 2013, 12:50:27 PM

Well the retired people I see doing it have been landlords before and know what they are doing.  They now have the time to focus on it and it is what they know.

But doing this was not their first choice, they are doing it because of the low interest rates which ruined their plans at least in the short term.  I was just using that as an example not general advice for everybody.

Don't confuse the lawyers with the idea that "regular people" actually know how to run a business, Valmy.

Yeah, that is why regular people need to retain lawyers to get them out of the messes those said regular people got themselves into in the first place.

QuoteA man is flying in a hot air balloon when he realizes he is lost. He reduces his altitude and spots a man in a field below. He lowers the balloon toward the man and shouts to him, "Excuse me, can you help me? I am late to meet a friend, but I don't know where I am."

The man below says, "I'm happy to help. You are in a hot air balloon, hovering approximately 30 feet above this field. You are between 40 and 42 degrees N. latitude, and between 58 and 60 degrees W. longitude."

After a brief pause, the balloonist declares: "You must be a lawyer."

"I am" replies the man. "How did you know?"

"Well," says the balloonist, "everything you have told me I am sure is technically correct, but I have no idea what to make of your information, and the fact is I am still lost."

The man below responds, "Indeed. And you ... You must be a client."

"Why, yes, I am," replies the balloonist, "how in the world did you know?"

"Well," says the man, "you don't know where you are, or where you are going. You have made a promise which you have no idea how to keep, and you expect me to solve your problem. The fact is you are in the exact same position you were in before we met, but now it is somehow my fault."

You have that thing in a note on your desktop & you just copy paste it at every opportunity, right?

Quote from: Grey Fox on January 25, 2013, 01:05:50 PM
You have that thing in a note on your desktop & you just copy paste it at every opportunity, right?

Thats a good idea.  It would save the google search next time.

Quote from: crazy canuck on January 25, 2013, 01:07:03 PM

Quote from: Grey Fox on January 25, 2013, 01:05:50 PM
You have that thing in a note on your desktop & you just copy paste it at every opportunity, right?

Thats a good idea.  It would save the google search next time.

Glad to help. Can I get a company mug for my troubles?

Quote from: crazy canuck on January 25, 2013, 01:04:17 PM

Yeah, that is why regular people need to retain lawyers to get them out of the messes those said regular people got themselves into in the first place.

QuoteA man is flying in a hot air balloon when he realizes he is lost. He reduces his altitude and spots a man in a field below. He lowers the balloon toward the man and shouts to him, "Excuse me, can you help me? I am late to meet a friend, but I don't know where I am."

The man below says, "I'm happy to help. You are in a hot air balloon, hovering approximately 30 feet above this field. You are between 40 and 42 degrees N. latitude, and between 58 and 60 degrees W. longitude."

After a brief pause, the balloonist declares: "You must be a lawyer."

"I am" replies the man. "How did you know?"

"Well," says the balloonist, "everything you have told me I am sure is technically correct, but I have no idea what to make of your information, and the fact is I am still lost."

The man below responds, "Indeed. And you ... You must be a client."

"Why, yes, I am," replies the balloonist, "how in the world did you know?"

"Well," says the man, "you don't know where you are, or where you are going. You have made a promise which you have no idea how to keep, and you expect me to solve your problem. The fact is you are in the exact same position you were in before we met, but now it is somehow my fault."

That's a stupid annecdote. The guy isn't blaming the lawyer; he's just saying that the information provided wasn't helpful. Not only that, but the guy made the promise knowing how to keep it when he made it, but asking for advice once things went left (possibly literally). Instead of offering useful help, the lawyer talked around him and over his head, and treated him like an idiot for choosing a different path.

Quote from: merithyn on January 25, 2013, 01:10:05 PM
That's a stupid annecdote. The guy isn't blaming the lawyer; he's just saying that the information provided wasn't helpful. Not only that, but the guy made the promise knowing how to keep it when he made it, but asking for advice once things went left (possibly literally). Instead of offering useful help, the lawyer talked around him and over his head, and treated him like an idiot for choosing a different path.

It might also be why a google search reveals the words "client" and "lawyer" are changed out for any amount of terms (like "manager" and "engineer" or "consultant") as it is just used to make whomever is using the anecdote feel good about themselves.

Quote from: merithyn on January 25, 2013, 01:10:05 PM

Quote from: crazy canuck on January 25, 2013, 01:04:17 PM

Yeah, that is why regular people need to retain lawyers to get them out of the messes those said regular people got themselves into in the first place.

QuoteA man is flying in a hot air balloon when he realizes he is lost. He reduces his altitude and spots a man in a field below. He lowers the balloon toward the man and shouts to him, "Excuse me, can you help me? I am late to meet a friend, but I don't know where I am."

The man below says, "I'm happy to help. You are in a hot air balloon, hovering approximately 30 feet above this field. You are between 40 and 42 degrees N. latitude, and between 58 and 60 degrees W. longitude."

After a brief pause, the balloonist declares: "You must be a lawyer."

"I am" replies the man. "How did you know?"

"Well," says the balloonist, "everything you have told me I am sure is technically correct, but I have no idea what to make of your information, and the fact is I am still lost."

The man below responds, "Indeed. And you ... You must be a client."

"Why, yes, I am," replies the balloonist, "how in the world did you know?"

"Well," says the man, "you don't know where you are, or where you are going. You have made a promise which you have no idea how to keep, and you expect me to solve your problem. The fact is you are in the exact same position you were in before we met, but now it is somehow my fault."

That's a stupid annecdote. The guy isn't blaming the lawyer; he's just saying that the information provided wasn't helpful. Not only that, but the guy made the promise knowing how to keep it when he made it, but asking for advice once things went left (possibly literally). Instead of offering useful help, the lawyer talked around him and over his head, and treated him like an idiot for choosing a different path.

:yes:

I guess the balloonist is a fault as he interrupted the lawyer's train of thought (going around thinking how clever he was), so he had no option but to be condescending. 

The analogy would have been better, if the lawyer had asked the man to drop a line to the ground, the lawyer then pulls on the rope till balloon is grounded, they swap positions and lawyer then ascends to balloons previous position.

Now he has the man's only remaining substantial asset, is now his only means of escape and can now really look down upon him.  :cool:

Quote from: merithyn on January 25, 2013, 01:10:05 PM

Quote from: crazy canuck on January 25, 2013, 01:04:17 PM

Yeah, that is why regular people need to retain lawyers to get them out of the messes those said regular people got themselves into in the first place.

QuoteA man is flying in a hot air balloon when he realizes he is lost. He reduces his altitude and spots a man in a field below. He lowers the balloon toward the man and shouts to him, "Excuse me, can you help me? I am late to meet a friend, but I don't know where I am."

The man below says, "I'm happy to help. You are in a hot air balloon, hovering approximately 30 feet above this field. You are between 40 and 42 degrees N. latitude, and between 58 and 60 degrees W. longitude."

After a brief pause, the balloonist declares: "You must be a lawyer."

"I am" replies the man. "How did you know?"

"Well," says the balloonist, "everything you have told me I am sure is technically correct, but I have no idea what to make of your information, and the fact is I am still lost."

The man below responds, "Indeed. And you ... You must be a client."

"Why, yes, I am," replies the balloonist, "how in the world did you know?"

"Well," says the man, "you don't know where you are, or where you are going. You have made a promise which you have no idea how to keep, and you expect me to solve your problem. The fact is you are in the exact same position you were in before we met, but now it is somehow my fault."

That's a stupid annecdote. The guy isn't blaming the lawyer; he's just saying that the information provided wasn't helpful. Not only that, but the guy made the promise knowing how to keep it when he made it, but asking for advice once things went left (possibly literally). Instead of offering useful help, the lawyer talked around him and over his head, and treated him like an idiot for choosing a different path.

Yeah, you are a typical client.  and the fact is I am still lost - Tell me again whos fault that is?

Quote from: crazy canuck on January 25, 2013, 01:20:46 PM
Yeah, you are a typical client.  and the fact is I am still lost - Tell me again whos fault that is?

I don't think the balloonist said it was the lawyer's fault just that the lawyer's assistance was completely useless.

Quote from: crazy canuck on January 25, 2013, 01:20:46 PM

Yeah, you are a typical client.  and the fact is I am still lost - Tell me again whos fault that is?

That's not an assignation of blame, but rather a statement of fact. If he's assigning blame, it's to the uselessness of the lawyer's "help", not to his particular situation.

Quote from: crazy canuck on January 25, 2013, 12:56:14 PM
But what you could do is take your 401k contributions in cash and then invest the said cash in the time and place that best suites you.  That is generally how our equivalent works.

I didn't know the answer so I had to ask around.  Apparently you could pile up a balance in a money market fund (paying 1 X 10 -23 power interest currrently), liquidate it and buy into one of the other funds offered in the 401k, but not into the entire universe of investible assets in the world.  If you can do that in the Canadian system your system is much better than ours.

Agree with the emerging consensus that the lawyer in the balloonist story is a dickhead.

Quote from: merithyn on January 25, 2013, 12:57:26 PM

Quote from: Valmy on January 25, 2013, 12:50:27 PM

Well the retired people I see doing it have been landlords before and know what they are doing.  They now have the time to focus on it and it is what they know.

But doing this was not their first choice, they are doing it because of the low interest rates which ruined their plans at least in the short term.  I was just using that as an example not general advice for everybody.

Don't confuse the lawyers with the idea that "regular people" actually know how to run a business, Valmy.

I have no idea why the relatively simple notion that businesses carry risks and this is a business with more risk than most retirees who are looking at it as being relatively safe know about, as I've seen myself from frantic requests for legal advice should cause such huffing. Naturally, lawyers are going to have a better notion of the downsides of such a business than non-lawyers - it is, after all, our trade to deal with such downsides.

Quote from: The Minsky Moment on January 25, 2013, 12:50:35 PM

Quote from: Valmy on January 25, 2013, 12:46:27 PM
Buying individual stocks is a little different than 'investing in the stockmarket' in general and relying on its track record of longterm growth though isn't it?

You can buy ETFs that track passive indices; in fact, those are may of the most popular ETFs.
There is a small fee advantage for ETFs although for the better passive MFs like Vanguard it is a pretty small difference.

Well shows what I know.  Since I have had no money to invest recently (besides my pension contributions) my practical experience is rather limited :P

Quote from: Malthus on January 25, 2013, 02:05:20 PM
I have no idea why the relatively simple notion that businesses carry risks and this is a business with more risk than most retirees who are looking at it as being relatively safe know about, as I've seen myself from frantic requests for legal advice should cause such huffing. Naturally, lawyers are going to have a better notion of the downsides of such a business than non-lawyers - it is, after all, our trade to deal with such downsides.

Anyway I did not mean to bring up any bad associations there Malthus I was just using it as an example of what some people have been forced to do with money being less able to make money right now.

Quote from: Valmy on January 25, 2013, 02:15:01 PM

Quote from: Malthus on January 25, 2013, 02:05:20 PM
I have no idea why the relatively simple notion that businesses carry risks and this is a business with more risk than most retirees who are looking at it as being relatively safe know about, as I've seen myself from frantic requests for legal advice should cause such huffing. Naturally, lawyers are going to have a better notion of the downsides of such a business than non-lawyers - it is, after all, our trade to deal with such downsides.

Anyway I did not mean to bring up any bad associations there Malthus I was just using it as an example of what some people have been forced to do with money being less able to make money right now.

Personally, my retirement plan is to become a Walmart greeter.  ;)

Quote from: Valmy on January 25, 2013, 02:15:01 PM

Quote from: Malthus on January 25, 2013, 02:05:20 PM
I have no idea why the relatively simple notion that businesses carry risks and this is a business with more risk than most retirees who are looking at it as being relatively safe know about, as I've seen myself from frantic requests for legal advice should cause such huffing. Naturally, lawyers are going to have a better notion of the downsides of such a business than non-lawyers - it is, after all, our trade to deal with such downsides.

Anyway I did not mean to bring up any bad associations there Malthus I was just using it as an example of what some people have been forced to do with money being less able to make money right now.

My aunt is a doctor.  She owned the building her practice was in, which also has three apartments.  She recently closed her practice to take a government job, so is renting out the commercial space now as well.

It has been a source of continuing anguish for her, and then in turn for my dad and my other aunt.  Why she continues to own the building escapes me (although obviously it does bring in some extra money).

Maybe Meri has a perfect idea of how much work being a landlord can be.  I can't read her mind of course.  But I have my doubts.

Quote from: Malthus on January 25, 2013, 02:22:10 PM

Quote from: Valmy on January 25, 2013, 02:15:01 PM

Quote from: Malthus on January 25, 2013, 02:05:20 PM
I have no idea why the relatively simple notion that businesses carry risks and this is a business with more risk than most retirees who are looking at it as being relatively safe know about, as I've seen myself from frantic requests for legal advice should cause such huffing. Naturally, lawyers are going to have a better notion of the downsides of such a business than non-lawyers - it is, after all, our trade to deal with such downsides.

Anyway I did not mean to bring up any bad associations there Malthus I was just using it as an example of what some people have been forced to do with money being less able to make money right now.

Personally, my retirement plan is to become a Walmart greeter.  ;)

I'm going to open a defence shop.  I heard one defence lawyer ask another if he knew anyone who would want to rent an office from him - $600 a month.  I could easily cover the rent and then some and only have to work part-time.

Quote from: Valmy on January 25, 2013, 02:15:01 PM
Anyway I did not mean to bring up any bad associations there Malthus I was just using it as an example of what some people have been forced to do with money being less able to make money right now.

This is one of the biggest downsides to the Fed's easy money policy.

Quote from: Barrister on January 25, 2013, 02:25:22 PM

Quote from: Malthus on January 25, 2013, 02:22:10 PM

Quote from: Valmy on January 25, 2013, 02:15:01 PM

Quote from: Malthus on January 25, 2013, 02:05:20 PM
I have no idea why the relatively simple notion that businesses carry risks and this is a business with more risk than most retirees who are looking at it as being relatively safe know about, as I've seen myself from frantic requests for legal advice should cause such huffing. Naturally, lawyers are going to have a better notion of the downsides of such a business than non-lawyers - it is, after all, our trade to deal with such downsides.

Anyway I did not mean to bring up any bad associations there Malthus I was just using it as an example of what some people have been forced to do with money being less able to make money right now.

Personally, my retirement plan is to become a Walmart greeter.  ;)

I'm going to open a defence shop.  I heard one defence lawyer ask another if he knew anyone who would want to rent an office from him - $600 a month.  I could easily cover the rent and then some and only have to work part-time.

What's wrong with your car?

Quote from: Barrister on January 25, 2013, 02:23:38 PM
Maybe Meri has a perfect idea of how much work being a landlord can be.  I can't read her mind of course.  But I have my doubts.

Of course you do.

I'm an absinthe landlord.

Quote from: Barrister on January 25, 2013, 02:25:22 PM
I'm going to open a defence shop.  I heard one defence lawyer ask another if he knew anyone who would want to rent an office from him - $600 a month.  I could easily cover the rent and then some and only have to work part-time.

Heh I bet it would be odd to be working the other side of the fence.  :D

How much do property management companies charge to handle the landlord stuff?

Quote from: Phillip V on January 25, 2013, 02:58:33 PM
How much do property management companies charge to handle the landlord stuff?

Depends on where you live. Where I live, it's around 8-10% of the rent collected. So, if you charge $1000/month for rent, you pay them $80-100/month. If your mortgage is $750, that's a good chunk of your income for that property.

Quote from: Malthus on January 25, 2013, 02:05:20 PM
I have no idea why the relatively simple notion that businesses carry risks and this is a business with more risk than most retirees who are looking at it as being relatively safe know about, as I've seen myself from frantic requests for legal advice should cause such huffing. Naturally, lawyers are going to have a better notion of the downsides of such a business than non-lawyers - it is, after all, our trade to deal with such downsides.

Agreed.
A regular person could run a landlording business and chances are nothing will ever go seriously wrong.  But there still is that 5 percent chance that something could go horribly wrong.  Not so much of a problem if you are a big property company or a REIT that can spread that risk over lots of properties.  Bigger problem if you are small potatoes and only have a few.
The question is to what extent does the regular Joe accurately discount or somehow insure against the catastrophic risk?

What, pray tell, are the catastrophic risks of rental property ownership? :huh:

Quote from: Admiral Yi on January 25, 2013, 04:22:40 PM
What, pray tell, are the catastrophic risks of rental property ownership? :huh:

Well, to give a specific example I've seen in Real Life(tm) ... renter in multi-unit rental property turns out to have previously undisclosed mental illness (he was fine as long as he took his meds - landlord never noticed anything - but hates taking them); other renters all move out because living next to a mental patient isn't optimal (suffice it to say he never did anything actually criminal, but just very upsetting).

Turns out in Ontario it is very, very difficult to remove a tenant suffering from mental illness. Particularly if his parents regularly pay his rent.

Landlord ends up stuck with mostly empty building, containing 1 apparently immovable lunatic. [Solved the problem in the usual way - i.e., converting rental property into personal]

My father had his house rental burnt to the ground.  Though that actually ended up better as with no house, no renter. :)

Quote from: Malthus on January 25, 2013, 04:34:21 PM

Well, to give a specific example I've seen in Real Life(tm) ... renter in multi-unit rental property turns out to have previously undisclosed mental illness (he was fine as long as he took his meds - landlord never noticed anything - but hates taking them); other renters all move out because living next to a mental patient isn't optimal (suffice it to say he never did anything actually criminal, but just very upsetting).

Turns out in Ontario it is very, very difficult to remove a tenant suffering from mental illness. Particularly if his parents regularly pay his rent.

Landlord ends up stuck with mostly empty building, containing 1 apparently immovable lunatic. [Solved the problem in the usual way - i.e., converting rental property into personal]

And if you only purchase/rent out single-family homes?

Quote from: merithyn on January 25, 2013, 03:17:10 PM

Quote from: Phillip V on January 25, 2013, 02:58:33 PM
How much do property management companies charge to handle the landlord stuff?

Depends on where you live. Where I live, it's around 8-10% of the rent collected. So, if you charge $1000/month for rent, you pay them $80-100/month. If your mortgage is $750, that's a good chunk of your income for that property.

If you have that kind of mortgage on your rental property what you have is a highly leveraged investment.

Would you borrow $100,000 from the bank and invest it in the stock market?  If not, why would you do it with a rental property.

With a $750 mortgage and $1000 rent you're in a very thin edge.  If the water heater goes, there goes your profit for several months.  If you can't find a tenant for a month, there goes your profit for several months.

Quote from: merithyn on January 25, 2013, 04:42:08 PM

Quote from: Malthus on January 25, 2013, 04:34:21 PM

Well, to give a specific example I've seen in Real Life(tm) ... renter in multi-unit rental property turns out to have previously undisclosed mental illness (he was fine as long as he took his meds - landlord never noticed anything - but hates taking them); other renters all move out because living next to a mental patient isn't optimal (suffice it to say he never did anything actually criminal, but just very upsetting).

Turns out in Ontario it is very, very difficult to remove a tenant suffering from mental illness. Particularly if his parents regularly pay his rent.

Landlord ends up stuck with mostly empty building, containing 1 apparently immovable lunatic. [Solved the problem in the usual way - i.e., converting rental property into personal]

And if you only purchase/rent out single-family homes?

Well if you want a malthusian nightmare scenario...

Your single family home gets rented out.  Six months later the police bust down the front door to discover a grow up (substitute meth lab if you'd like).  The risk of mold means you have to rip out all of the drywall, and now you have to disclose it as a former grow up when you try to rent it.

Quote from: Barrister on January 25, 2013, 04:45:03 PM
If you have that kind of mortgage on your rental property what you have is a highly leveraged investment.

Would you borrow $100,000 from the bank and invest it in the stock market?  If not, why would you do it with a rental property.

With a $750 mortgage and $1000 rent you're in a very thin edge.  If the water heater goes, there goes your profit for several months.  If you can't find a tenant for a month, there goes your profit for several months.

Eh, I think your analysis might be off.  Part of that mortgage payment is interest (an expense that offsets your revenue) but part of it is also principle, the aquisition of equity.

Oh Jesus Christ what have I started?  I guess nobody but Yi even cares about my point in bringing up rental property.  I did not mean to bring out the legions of small business haters.

Yi is totally awesome.

Quote from: Admiral Yi on January 25, 2013, 04:51:07 PM

Quote from: Barrister on January 25, 2013, 04:45:03 PM
If you have that kind of mortgage on your rental property what you have is a highly leveraged investment.

Would you borrow $100,000 from the bank and invest it in the stock market?  If not, why would you do it with a rental property.

With a $750 mortgage and $1000 rent you're in a very thin edge.  If the water heater goes, there goes your profit for several months.  If you can't find a tenant for a month, there goes your profit for several months.

Eh, I think your analysis might be off.  Part of that mortgage payment is interest (an expense that offsets your revenue) but part of it is also principle, the aquisition of equity.

I'm well aware of that.  But how does that affect my analysis that getting a mortgage to buy rental property means you are using leverage?

Quote from: Admiral Yi on January 25, 2013, 04:22:40 PM
What, pray tell, are the catastrophic risks of rental property ownership? :huh:

Another Real Life story regarding a single unit rental. 

landlord rents to person who has good references.  After the initial rent is paid no more rent payments are made.  Normal rent payment demands are made under the leglislation but at this point no action can be taken.  Rent is again missed.  Eviction proceedings start which are successful.  An appeal of the eviction is launched which acts as an automatic stay on the eviction order.  The appeal by the renter is unsuccessful but he launches a judicial review of the appeal decision - another stay on the eviction.  Finally the judicial review is unsuccessful and the landlord gets his property back.  He goes in to look at the place and it is completely trashed to the tune of about 30k to renovate and repair.  Plus all the legal fees to finally get the renter evicted.

Now how good did that rental investment look?

Quote from: Barrister on January 25, 2013, 04:45:03 PM

Quote from: merithyn on January 25, 2013, 03:17:10 PM

Quote from: Phillip V on January 25, 2013, 02:58:33 PM
How much do property management companies charge to handle the landlord stuff?

Depends on where you live. Where I live, it's around 8-10% of the rent collected. So, if you charge $1000/month for rent, you pay them $80-100/month. If your mortgage is $750, that's a good chunk of your income for that property.

If you have that kind of mortgage on your rental property what you have is a highly leveraged investment.

Would you borrow $100,000 from the bank and invest it in the stock market?  If not, why would you do it with a rental property.

With a $750 mortgage and $1000 rent you're in a very thin edge.  If the water heater goes, there goes your profit for several months.  If you can't find a tenant for a month, there goes your profit for several months.

Agreed.  I view individuals renting out their homes as a last resort.  If you have a property that you don't occupy, you better get some revenue out of it rather than just a stream of expenses.  However, buying assets on a margin to rent them for attempted profit is just a lunacy, IMO.  Leverage equals great vulnerability to bad luck.

Quote from: DGuller on January 25, 2013, 04:53:44 PM
However, buying assets on a margin to rent them for attempted profit is just a lunacy, IMO.  Leverage equals great vulnerability to bad luck.

Yeah I think you should only invest in real estate if you can afford to pay cash.  Just my opinion.  Only mortgage if you are going to live there.

Quote from: Barrister on January 25, 2013, 04:52:55 PM
I'm well aware of that.  But how does that affect my analysis that getting a mortgage to buy rental property means you are using leverage?

I take it all back.

Quote from: Barrister on January 25, 2013, 04:45:03 PM
If you have that kind of mortgage on your rental property what you have is a highly leveraged investment.

Would you borrow $100,000 from the bank and invest it in the stock market?  If not, why would you do it with a rental property.

With a $750 mortgage and $1000 rent you're in a very thin edge.  If the water heater goes, there goes your profit for several months.  If you can't find a tenant for a month, there goes your profit for several months.

Which is why the houses that I'm looking at are in the $400-$450 mortgage range for a 4-bedroom house where the bedrooms average a rental price of $250-$300/bedroom.

But what your mortgage is - and how much you intend to get from the houses monthly - will dictate whether or not it's wise to hire a management company. There are a lot of other factors to consider, too, but that's usually the main consideration for people.

Again, I HAVE looked into this quite thoroughly, BB, despite what you seem to think.

Quote from: crazy canuck on January 25, 2013, 04:53:04 PM

Quote from: Admiral Yi on January 25, 2013, 04:22:40 PM
What, pray tell, are the catastrophic risks of rental property ownership? :huh:

Another Real Life story regarding a single unit rental. 

landlord rents to person who has good references.  After the initial rent is paid no more rent payments are made.  Normal rent payment demands are made under the leglislation but at this point no action can be taken.  Rent is again missed.  Eviction proceedings start which are successful.  An appeal of the eviction is launched which acts as an automatic stay on the eviction order.  The appeal by the renter is unsuccessful but he launches a judicial review of the appeal decision - another stay on the eviction.  Finally the judicial review is unsuccessful and the landlord gets his property back.  He goes in to look at the place and it is completely trashed to the tune of about 30k to renovate and repair.  Plus all the legal fees to finally get the renter evicted.

Now how good did that rental investment look?

And that's why you bought a place without a basement suite.

This discussion shows why I haven't bought into the idea many military folks have of "buy a place, then when I relocate, rent it out...repeat...become rich from several rental properties spread all over".

It -might- work out, if you are successful finding more-likely-to-be-reliable(or, if needed, it is supposedly easy to have Uncle Sam take their money for you if they go deadbeat) fellow military renters...but the headaches in terms of time/money of being an absentee landlord?  No thanks.

And while there is the property management company route...from the experience my brother has with his home back near Seattle (he relocated for work)...shopping for a good/competent property manager can almost be as bad as getting a good renter.

I disagree with Valmy and DGuller.  If one is going to invest in RE to rent out, then IMO one should borrow, provided one does so  non-recourse, or one can set up some kind of limited liability entity as a barrier.  That way at least you are limiting the potential loss to the money down.

Quote from: The Minsky Moment on January 25, 2013, 05:58:49 PM
I disagree with Valmy and DGuller.  If one is going to invest in RE to rent out, then IMO one should borrow, provided one does so  non-recourse, or one can set up some kind of limited liability entity as a barrier.  That way at least you are limiting the potential loss to the money down.

Yeah, I was going to add that disclaimer, but then figured that limited liability didn't really apply in Meri's case.  Obviously leverage with limited liability company you just started is pretty sweet if you can get it.

Quote from: The Minsky Moment on January 25, 2013, 05:58:49 PM
I disagree with Valmy and DGuller.  If one is going to invest in RE to rent out, then IMO one should borrow, provided one does so  non-recourse, or one can set up some kind of limited liability entity as a barrier.  That way at least you are limiting the potential loss to the money down.

Yeah, but good luck trying to find a lender who will not make you sign an additional personal covenenant in blood.

Surely there are health regulations against that?

Quote from: The Brain on January 25, 2013, 06:31:50 PM
Surely there are health regulations against that?

One would have thought the US banking sector would have a lot of regulation that simply wasnt there.

I've thought a lot about investing in RE once I accumulate some cash. My preferred strategy would be going the slum lord route and renting out Section 8 housing. Since the government pays a large portion of the tab, there's much less of a risk of non-payment. Your tenants are incentivized to follow the rules and not fuck up your place because they stand to lose Section 8 benefits if they stop paying rent or break rules.

Quote from: Barrister on January 25, 2013, 10:16:15 AM

Quote from: Barrister on January 23, 2013, 05:44:52 PM
Just received the following email:

QuoteI want you to be among the first to hear about the Premier's Televised Address. It is scheduled for broadcast on CTV across the province tomorrow (Thursday) night at 6:52 p.m. It will be re-broadcast on CTV2 at 7:52pm, 11:52pm and on January 25 at 11:52 am.

I know there's been a lot of discussion lately, among the Alberta Public Service and across the province, about the current fiscal state of the province and what that might mean to both the revenue and expenditure sides of the equation. Premier Redford will speak to Albertans about her vision for our province, the priorities of this government, the opportunities to meet the growth that we continue to experience as well as the fiscal challenges that we currently face. I encourage you to watch the Address, which will be immediately followed tomorrow night with a special edition of the Connector delivered to your inbox that will feature highlights from the address, along with messages from the Premier and me to all members of the APS.

I'm confident that through an informed, committed, inspired and engaged Alberta Public Service, we will rise to any challenge put before us. With your support, we'll continue to deliver the core programs and services important to Albertans.

There will be blood.   :ph34r:


For those of you not following the state of Alberta's economy, the recent declines in the price of oil (which are magnified here due to limited shipping / refining capacity) is doing a number on the province's bottom line.

What a stupid announcement.

'Despite record-setting deficits, we are committed that we will not raise taxes, nor will we cut social services'.

Instead they are going to "review spending", as if we haven't heard that before. :rolleyes:

The first shoe finally dropped - a three year salary freeze for non-union and management public servants (i.e. me).

The second shoe, pensions, is still dangling...  :ph34r:

I will get details this week of government contract change at my workplace; may have to take a $10k-$20k paycut. :(

Quote from: Phillip V on February 19, 2013, 03:58:47 PM
I will get details this week of government contract change at my workplace; may have to take a $10k-$20k paycut. :(

I'm not bitching about a salary freeze because I know what the alternatives could have been.

Hope that doesn't happen to you PV. :console:

*catches up on the thread*

Investing in rental properties: stupid IMO.  Who wants to deal with scum all day?
Investing in land: much less stupid.  I've been thinking about buying timber land down here or a bit further south.  While the trees are maturing I can camp, fish, etc. there.  Once it's TIMMMMMMMBER time, I make money off of my recreational land, and then I'd consider building a cabin on it.  What is this scheme free of?  Scummy poor people.

Quote from: Caliga on February 19, 2013, 05:04:27 PM
*catches up on the thread*

Investing in rental properties: stupid IMO.  Who wants to deal with scum all day?
Investing in land: much less stupid.  I've been thinking about buying timber land down here or a bit further south.  While the trees are maturing I can camp, fish, etc. there.  Once it's TIMMMMMMMBER time, I make money off of my recreational land, and then I'd consider building a cabin on it.  What is this scheme free of?  Scummy poor people.

How much capital is required to make it worthwhile?

I've seen decently sized timber parcels for ~$100K in Tennessee, Mississippi and Alabama.

Quote from: Caliga on February 19, 2013, 05:04:27 PM
Investing in rental properties: stupid IMO.  Who wants to deal with scum all day?

A gal in the office owns some rental property.  I get to overhear her talking to her tenants now & then.  I'm with you-- no thanks.

Did I ever tell you guys the story about the campground my parents used to own that had a live-in manager, and after my dad fired the guy he refused to leave and it took OVER A YEAR of court wrangling for my dad to get his ass out of there? :bleeding:  That experience alone would make me shy away from ever owning a rental property.

A quick look says the land goes for between 2000 and 5000 per acre. So for the cost of a residential property you could get maybe 50 acres. What kind of income can you expect out of that?

I had no problem renting out my 1st house. Of course, I didn't rent it out to scum.

Quote from: MadImmortalMan on February 19, 2013, 05:51:58 PM
A quick look says the land goes for between 2000 and 5000 per acre. So for the cost of a residential property you could get maybe 50 acres. What kind of income can you expect out of that?

Sharecropping.

Quote from: Ed Anger on February 19, 2013, 05:55:21 PM
I had no problem renting out my 1st house. Of course, I didn't rent it out to scum.

Well I rented mine out to my mom. Which has the risk that I wouldn't ever want to evict her, naturally.   :P

The one time I looked into it you could purchase naked farmland (broken but no improvements, far from town) for about $100k, and expect to receive ~$2-3k per year in rents.  Oh - quarter section worth, or 160 acres.

Which of course is a 2-3% ROI.  Land of course is basically inflation proof and quite safe, but hardly lucrative.

What if the land in question was over a shale play?

On the vacant/timber land idea....

My grandmother owned some farmland out near Walla Walla, WA.  My dad and his sister, who now share ownership, have basically had it on the Fed's program that pays them to grow grass on it.  (Though I kinda thought they could have gotten into the mini-wine boom going on in that area).

My grandmother (now aunt, as in above), also had a good amount of timbered land in the mountains above Walla Walla.  They'd occasionally cut/sell some of the large trees on the property, and I was surprised at how much cash that brought in.  Enough to offset property taxes?  Probably not, but dunno.

Christmas tree farm.

There would have to be something that pulls down more cash flow than simply putting the money in a REIT and pocketing a 15% dividend.

Quote from: MadImmortalMan on February 19, 2013, 07:10:28 PM
There would have to be something that pulls down more cash flow than simply putting the money in a REIT and pocketing a 15% dividend.

:cool: I'm a big fan of this strategy.

Quote from: MadImmortalMan on February 19, 2013, 06:20:04 PM
What if the land in question was over a shale play?

One of my high school teachers, who happens to also be really good friends with my mom, is married to one of those survivalist/I wanna be a lumberjack and escape the white-collar world type.  Back in the mid 80s he insisted on buying a fuckton of land in upstate Pennsylvania with most of their savings.

Turns out that land is smack dab in the middle of the Marcellus shale play.  They sold it a few years back and are now extremely wealthy thanks to his paranoia. :)

Quote from: Caliga on February 19, 2013, 07:37:46 PM

Quote from: MadImmortalMan on February 19, 2013, 06:20:04 PM
What if the land in question was over a shale play?

One of my high school teachers, who happens to also be really good friends with my mom, is married to one of those survivalist/I wanna be a lumberjack and escape the white-collar world type.  Back in the mid 80s he insisted on buying a fuckton of land in upstate Pennsylvania with most of their savings.

Turns out that land is smack dab in the middle of the Marcellus shale play.  They sold it a few years back and are now extremely wealthy thanks to his paranoia. :)

How wealthy, and what are their daily activities/occupations now?

They're retired, and they do a ton of travelling all over the world.  Not sure exactly how wealthy... it'd be kind of rude to ask I think. :)

Get a local Chinaman to ask for you.

Quote from: Barrister on February 19, 2013, 03:54:01 PM

Quote from: Barrister on January 25, 2013, 10:16:15 AM

Quote from: Barrister on January 23, 2013, 05:44:52 PM
Just received the following email:

QuoteI want you to be among the first to hear about the Premier's Televised Address. It is scheduled for broadcast on CTV across the province tomorrow (Thursday) night at 6:52 p.m. It will be re-broadcast on CTV2 at 7:52pm, 11:52pm and on January 25 at 11:52 am.

I know there's been a lot of discussion lately, among the Alberta Public Service and across the province, about the current fiscal state of the province and what that might mean to both the revenue and expenditure sides of the equation. Premier Redford will speak to Albertans about her vision for our province, the priorities of this government, the opportunities to meet the growth that we continue to experience as well as the fiscal challenges that we currently face. I encourage you to watch the Address, which will be immediately followed tomorrow night with a special edition of the Connector delivered to your inbox that will feature highlights from the address, along with messages from the Premier and me to all members of the APS.

I'm confident that through an informed, committed, inspired and engaged Alberta Public Service, we will rise to any challenge put before us. With your support, we'll continue to deliver the core programs and services important to Albertans.

There will be blood.   :ph34r:


For those of you not following the state of Alberta's economy, the recent declines in the price of oil (which are magnified here due to limited shipping / refining capacity) is doing a number on the province's bottom line.

What a stupid announcement.

'Despite record-setting deficits, we are committed that we will not raise taxes, nor will we cut social services'.

Instead they are going to "review spending", as if we haven't heard that before. :rolleyes:

The first shoe finally dropped - a three year salary freeze for non-union and management public servants (i.e. me).

The second shoe, pensions, is still dangling...  :ph34r:

Oh, the news reports also mentions a plan to reduce the number of managers by 10%.

My boss seems positive they won't touch us.  But since prosecutors are probably 5-10% of the overall number of managers within GOA... :unsure:

They "offer" to give me 15% pay cut. Should I take it? :hmm:

I raided my 401K (403B, actually) in order to procure the down payment for my house. Despite taking a loss because of early withdrawal penalties, this house was a good investment. It appraised $15K higher than my purchase price, so there was instant equity.

Quote from: Phillip V on February 20, 2013, 01:04:37 PM
They "offer" to give me 15% pay cut. Should I take it? :hmm:

I don't see the point of just walking away.  At least accept it, then start looking for another job.

Quote from: fahdiz on February 20, 2013, 01:17:10 PM
I raided my 401K (403B, actually) in order to procure the down payment for my house. Despite taking a loss because of early withdrawal penalties, this house was a good investment. It appraised $15K higher than my purchase price, so there was instant equity.

Eh, I did that using my dad RRSP. :lol:

Quote from: Admiral Yi on February 20, 2013, 01:32:49 PM

Quote from: Phillip V on February 20, 2013, 01:04:37 PM
They "offer" to give me 15% pay cut. Should I take it? :hmm:

I don't see the point of just walking away.  At least accept it, then start looking for another job.

Accepted their offer yesterday and interview with two other companies today. :showoff:

Good man.